Recognition of film and television costs

Go to the website of Walt Disney Studios at http://corporate.disney.go.com. Click on Investor Relations and then Financial Information and Filings. Open the most recent Annual Report. Find the Consolidated Balance Sheets and examine the line item, "Film and television costs." Also, find the supplemental section on Accounting Policies and Estimates and read the paragraphs under "Film and Television Revenues and Costs."

When does Disney recognize its film and television costs on its income statement? Does Disney use a job order costing system to account for film and television costs? What leads you to that conclusion?

Solution Preview

I am giving the extract from the latest 10-K below -

ACCOUNTING POLICIES AND ESTIMATES

We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements.

Film and Television Revenues and Costs

We expense film and television production and participation costs over the applicable product life cycle ...

Solution Summary

The solution explains when Disney recognizes its film and television costs on its income statement